UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission file number 0-23637

Global Preferred Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

6455 East Johns Crossing, Suite 402

Duluth, Georgia 30097

(770) 248-3311

(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, Par Value $.001

(Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes o                    No þ

      The aggregate market value of the voting common stock, held by non-affiliates of the registrant as of June 30, 2004, was approximately $23,941,438 computed on the basis of the last price at which the common equity was sold ($10.00 per share).

      At March 14, 2005, there were 4,141,684 shares of common stock outstanding.

TABLE OF CONTENTS

PART I

Overview

      Global Preferred Holdings, Inc. was incorporated in Delaware in 1995 as a holding company and owns all of the outstanding capital stock of Global Preferred Re Limited, Global Preferred Solutions, Inc., Global Preferred Resources, Inc. and Preferred Advantage Insurance Services, Inc. Global Preferred Re Limited is a Bermuda company registered as a long-term insurer under the Bermuda Insurance Act 1978 (“Global Preferred Re”) and was formed during 1995. Global Preferred Solutions, Global Preferred Resources and Preferred Advantage Insurance Services were formed during 2003. References in this report to “Global Preferred,” “we,” “us,” “our” and “our company” refer to Global Preferred Holdings, Inc. and its subsidiaries unless the context otherwise requires or is expressly stated.

      Global Preferred, through its subsidiaries, provides profit sharing solutions for independent marketing organizations or “IMOs” in the life insurance and annuity industry. An IMO is an organization of independent agents that contracts with one or more insurance companies to distribute and market securities and insurance products. These organizations include: insurance agencies, insurance brokers, broker-dealers, banks, savings and loans and any other group or institution that markets life insurance and annuities. Our profit sharing solutions include:

      Both the IMOs and insurers benefit from mutually rewarding relationships based on aligned interests, a dedication to improving the quality of business written, and a focus on managing insurance and distribution risk for long-term economic rewards. Through these collaborative relationships:

      Our core business consists of providing reinsurance on business that has resulted from a relationship with the independent agents of an IMO affiliate of AEGON USA, Inc. Although our reinsurance business is directed to us through these independent agent relationships, the life insurance and annuity policies that we currently reinsure are underwritten and issued by various ceding life companies. In the insurance industry, the term “ceding” refers to the use of reinsurance to transfer from one insurance company to another some or all of the risks associated with one or more insurance policies. We often refer to a life

insurance company that reinsures life insurance and annuity policies through us as a “ceding life company.” The ceding life companies who issue the policies we currently reinsure are:

      Currently, our largest reinsurance relationship is with Western Reserve, which accounted for 92% of our reinsurance premiums and reinsured policy revenues as of December 31, 2004.

      When we reinsure a policy for a life insurance company, we continue to reinsure that policy for as long as the policy remains in effect. Although the life insurance company may have the right to cancel the reinsurance on one or more policies, this right can generally occur only upon certain defaults or after a period of 10 years or longer, depending on the particular reinsurance agreement. By maintaining a continued financial interest in these policies, we share the ongoing revenue streams associated with the policies. Additionally, as we reinsure new policies, we expand the base of policies in which we maintain an economic interest.

      For the year ended December 31, 2004, we earned net income of $4.0 million on revenues of $30.5 million. Our total assets and stockholders’ equity at December 31, 2004 was $77.8 million and $49.3 million, respectively. As of December 31, 2004, we reinsured over 221,000 life insurance policies and riders with an aggregate face value of over $7.0 billion and over 44,000 annuity policies with aggregate contract benefits of over $244 million.

Sale of Global Preferred Re

      On December 30, 2004, we entered into an agreement and plan of reorganization (the “Reorganization Agreement”) with AEGON N.V. (“AEGON”) and GPRE Acquisition Corp. (“GAC”), a direct, wholly owned subsidiary of AEGON, to transfer to GAC all of the outstanding shares of Global Preferred Re. Pursuant to the terms of the Reorganization Agreement, we will receive AEGON common shares in exchange for all of the outstanding shares of Global Preferred Re. The Reorganization Agreement provides that we must dissolve and distribute all remaining AEGON common shares received pursuant to the Reorganization Agreement and any of our other remaining assets to our stockholders, after making adequate provision for our liabilities in accordance with Delaware law, no more than twelve months after closing of the asset transfer.

      The Reorganization Agreement specifies that the transaction is subject to the approval of our stockholders, customary closing conditions and regulatory reviews, including approval of the transaction by the Bermuda Monetary Authority. The Reorganization Agreement is terminable in certain circumstances, some of which may be subject to payment of a termination fee by the respective terminating party. If this transaction is not completed, Global Preferred’s operations will continue as we explore alternatives to offer our stockholders liquidity for their Global Preferred stock.

      While the Reorganization Agreement is in effect, Global Preferred and Global Preferred Re must obtain prior written consent from AEGON and GAC to conduct certain transactions, which may include: (1) paying dividends, (2) issuing or repurchasing our stock, (3) sale of assets or property, (4) entering into or modifying any contracts or reinsurance agreements, (5) altering the mix of invested assets of Global Preferred Re, (6) incurring any indebtedness, or (7) making any loans, capital contributions or investments that would constitute an asset of Global Preferred Re.

Recent Developments

      On February 16, 2005, Monte Holm resigned as a director of Global Preferred Holdings, Inc., effective as of such date. The resignation was not related to any disagreement between Mr. Holm and Global Preferred on any matter relating to our operations, policies or practices.

      On February 24, 2005, AEGON filed a registration statement on Form F-4 in connection with the Reorganization Agreement that will also serve as our proxy statement for the special meeting of stockholders to be called to consider the Reorganization Agreement and the transactions contemplated thereby including our dissolution following the consummation of the sale of Global Preferred Re.

Life Insurance Overview

      Life insurance products typically fall within a spectrum ranging from insurance protection products that pay a sum of money upon the death of the insured to asset accumulation products that offer the insured a tax-advantaged investment vehicle for long-term savings and retirement income. At the insurance protection end of the spectrum is term life insurance. Term life insurance is often renewable on a yearly basis and pays a sum of money upon the death of the insured. In general, as you move along the insurance product spectrum, the investment component becomes increasingly more meaningful, with the end point being a variable annuity product, which is an asset accumulation product. Variable annuities provide the policyholder the opportunity to vary benefit payments depending on the investment results of the assets held in the account.

      We currently reinsure two types of insurance products: variable universal life insurance and variable annuities. We have the capability to expand the scope of our reinsurance to include other life insurance products, such as term life, whole life, universal life and fixed annuities.

      Variable Universal Life. Variable universal life is an investment-oriented insurance product that combines an investment product with a death benefit. This product enables the policyholder to vary the timing and amount of premium payments, the level of death benefit protection, and the investment allocation of policy funds. Premiums paid by the policyholder, which comprise a separate pool of assets, are placed in the insurance company’s fixed account or separate accounts. For the funds in the separate accounts, the policyholder may choose among alternative investment vehicles, usually including stock funds, corporate or government bond funds, and money-market accounts. The death benefits and cash values in variable universal life policies vary to reflect the investment experience of the policy’s fixed or separate accounts. The policy may have a guaranteed minimum death benefit while cash values vary with the investment performance of the fixed or separate account.

      Variable Annuities. Variable annuity policies provide for flexible premium payments and guarantee that the policyholder will receive periodic benefit payments beginning on a specified date. Prior to the specified date, premium payments made and resulting income earned accumulate on a tax-deferred basis. Similar to variable universal life, variable annuity policyholders may allocate their account balances among a variety of investment vehicles. Accordingly, the resulting benefit payments to the annuity policyholder will vary depending on the performance of the invested assets. Variable annuity policies may provide a guaranteed minimum death benefit prior to the commencement of annuity benefit payments.

Reinsurance Overview

      Life insurance companies spread the risks they assume by purchasing insurance, known as reinsurance, from other insurers, known as reinsurers. A reinsurer agrees to indemnify another insurance company, commonly referred to as the ceding life company, for all or a portion of the insurance risks underwritten by the ceding life company under one or more of its own insurance polices. Ceding life companies receive a number of direct benefits from reinsurance, including:

      In addition to the direct benefits of reinsurance, a ceding life company that reinsures through an organization that has a relationship with the distribution channel that sells the product may receive a number of indirect benefits that more closely align their economic interests with those of the distribution channel. These indirect benefits may include higher quality, more profitable business, longer-term relationships, and higher sales volumes.

      In exchange for assuming a portion of the risk associated with a reinsured policy, the reinsurer receives a portion of the revenue stream associated with the policy so long as the reinsurance remains in effect.

      Reinsurance can be written on either a proportional, also known as quota share or pro rata, basis or a non-proportional, referred to as excess share or excess of loss, basis. Under quota share reinsurance, the reinsurer indemnifies the ceding life company against a predetermined percentage or share of the benefits paid by the ceding life company under policies it has issued. In reinsurance written on an excess share basis, the reinsurer indemnifies the ceding life company against that portion of benefits paid on the original policy in excess of a specified dollar amount.

Types of Reinsurance

      We currently write three types of reinsurance on a quota share basis: renewable term, coinsurance and modified coinsurance. For additional information pertaining to the types of reinsurance we write, refer to “Item. 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations — Types of Reinsurance.”

Industry Trends

      We believe that over the last few decades the production and distribution of life insurance has experienced several fundamental trends.

      We believe that these trends have led to a misalignment of interests between the IMOs that distribute the products and the life insurance companies that create those products. The separation of life insurance companies from distribution channels, followed by the growing strength of those distribution channels, creates an environment where the distributors control access to the life insurance consumers. The independent distributors’ ability to select the products to sell to the public has given them significantly greater influence over product development. Often, product selection decisions are driven by a desire for immediate commissions rather than on the value provided by long-term relationships focused on writing persistent, high quality business. Additionally, this short-term focus has inhibited the product development process, as life insurance companies are reluctant to invest in the development of products for distribution relationships that may not be long lasting. We believe that these trends have created an environment in which life insurance companies seek more stable and reliable distribution networks in which distributors have long-term incentives to write persistent, high quality business and the insurance companies have less pressure to pay higher commissions to the distributors solely to gain and maintain access to the consumers.

Growth Strategy

      Our objectives are to build strong financial performance, loyal IMO relationships and stockholder value. In addition to collaborative reinsurance relationships, through our subsidiaries we offer life insurance management and actuarial advisory services, and administrative services to both IMOs and insurers engaged in reinsurance or related activities. Our independence and objectivity, coupled with depth of experience and expertise associated with distribution systems and insurers, offers value added business solutions from a single source entity that can be essential in today’s environment. By providing these benefits to both the IMO and the insurer, we are able to develop long-term relationships with both parties, thereby contributing to our growth opportunities.

Distribution Relationships

      Our strategy is to generate reinsurance business through strong, incentive-based relationships with IMOs that have the desire and ability to establish long-term reinsurance relationships with the life insurance companies whose products they sell.

      We believe that IMOs that develop long-term relationships have a greater incentive to place profitable and persistent business with those life insurers that reinsure through their reinsurance partner. This three-party relationship creates positive economic opportunities for each party, as the IMO may benefit above and beyond commissions, and we and the life insurance company benefit through increased sales and incremental profitability of the business.

      All of the policies we currently reinsure have resulted from the marketing efforts of the independent agents who have been associated with World Financial Group, Inc., an affiliate of AEGON USA, Inc., and its predecessor, World Marketing Alliance, Inc. (“WMA Agency”). Our relationship with World Financial Group was formed in June 2001, when certain assets of WMA Agency were sold to World Financial Group. As a result of the asset acquisition, substantially all of the agents of WMA Agency became associated with World Financial Group. Our relationship with WMA Agency dates back to our founding in 1995, when we were principally formed to provide an opportunity for its agents to participate indirectly in the reinsurance of the business they produced. Many of those individual agents purchased an equity ownership in our company through a private sale of common stock in 1995 and a subsequent sale of preferred stock in 2000. Many of these agents still own a significant portion of the outstanding common stock of Global Preferred.

Reinsurance Relationships

      We currently provide reinsurance for variable universal life and variable annuity policies issued by four large life insurance companies. Our reinsurance agreements with these ceding life companies provide for our assumption of a portion of defined risks associated with specified products sold by certain independent agents with which we have a relationship. Reinsurance under these agreements is automatic, meaning we are required to accept the business ceded to us so long as the ceding life companies satisfy the terms of the reinsurance agreements.

      The following table indicates, by ceding life company, the types of policies we are currently reinsuring and the type of reinsurance applicable to each.

      We have four separate reinsurance agreements with Western Reserve that cover variable universal life insurance and variable annuity policies issued by Western Reserve on or after January 1, 1992, which are sold by the agents of World Financial Group and its predecessor. These agreements were entered into on July 1, 1996, January 1, 1998, April 1, 1998, and October 1, 1999, respectively. The agreement with American Skandia began on January 1, 1997 and covers policies on an American Skandia variable annuity product issued between January 1, 1997 and December 31, 2002 sold by those same agents. The Kemper agreement was effective September 1, 1996 and covers all policies on a Kemper variable universal life product issued between September 1, 1996 and March 31, 2001 sold by those agents. Our agreement with Pacific Life was effective on January 1, 2001 and covers policies on individual variable universal life products issued on or after January 1, 2001, sold by those agents.

      We believe that the terms of our reinsurance arrangements are favorable for our industry and that we were able to obtain these terms in part because of our relationships with the agents that sell the policies we reinsure. Our right to reinsure new business under our reinsurance agreements generally extends for an initial term of 3 to 5 years, with automatic renewals and one-year notices of termination following the initial term. Termination of our right to reinsure new business does not, however, affect our right to

continue to reinsure the policies reinsured at the time of termination. Under our agreements, we have the right to continue to reinsure a policy for as long as it remains in effect or until the ceding life company otherwise recaptures it. A ceding life company may have the right to recapture a reinsured policy only upon certain defaults or after a period of 10 years or longer, depending on the terms of the relevant reinsurance agreement.

      In July 2001, we entered into a First Right Agreement with Western Reserve that provides us a first right to reinsure certain new products issued by Western Reserve or its U.S. affiliates that are sold by agents associated with World Financial Group. Pursuant to this agreement, we possess the following contractual rights to:

      These rights automatically extend for one-year renewal periods unless either party gives notice of termination 180 days prior to the expiration of the applicable initial or renewal term. Certain of these rights would have expired at December 31, 2003 and thereafter, but have been indefinitely extended to a date 90 days following receipt of written notice by either party, which notice may not be given before the earlier of (a) the Effective Time (as defined in the Reorganization Agreement) or (b) the date of termination of the Reorganization Agreement.

      For the coinsurance and modified coinsurance of variable universal life and variable annuity products, rights under the First Right Agreement are subject to minimum sales volume thresholds. Western Reserve has indicated to us that total premium production requirements were not met for the reinsurance of variable universal life policies issued in 2003 and 2004 and for variable annuity policies issued in 2004.

      Global Preferred’s decision to reinsure these products, subject to the restrictions of the Reorganization Agreement, is based on a number of relevant factors, including the attractiveness of the reinsurance rates prescribed by the agreement, the volume of business and our available capital. So far, we have chosen not to commence reinsurance of this business because (a) deferral of the election will maximize our return on such business reinsured, (b) continued increases in our capital may result in opportunities of securing additional financing at a favorable cost, and (c) deferral allows us to maintain flexibility to invest in new business initiatives for diversification and future growth.

      Global Preferred entered into a Directed Reinsurance Agreement with World Financial Group in July 2001 that extends through June 8, 2008, which requires World Financial Group to use its commercially reasonable best efforts to help us secure the opportunity to reinsure all insurance products sold by its agents for insurance companies with which it has selling agreements other than Western Reserve and Western Reserve’s affiliates.

      We seek to enter into reinsurance agreements with other insurance companies from time to time and such decisions will be based on a number of relevant factors, including the proposed type of reinsurance, the attractiveness of the reinsurance rates prescribed by the agreement, the volume of business, our relationship with the insurance company and/or the IMO, and our available capital capacity. We also seek to enter into agreements with other IMOs similar to our directed reinsurance agreement with World Financial Group. However, while the Reorganization Agreement is in effect, Global Preferred and Global Preferred Re must obtain prior written consent from AEGON or GAC to enter into new reinsurance agreements.

Investments

      Our investments are selected with the objective of achieving favorable investment returns consistent with appropriate credit, diversification, tax and regulatory considerations, while providing sufficient liquidity to enable us to meet our obligations as a reinsurance company on a timely basis. We have developed specific investment guidelines that stress diversification of risk, conservation of principal, and liquidity. Our investments, however, will be subject to market risks and fluctuations, as well as to the risks inherent in particular securities. Our board of directors has established an Investment Committee to periodically review the guidelines and investment portfolio and to make recommendations to the board of directors regarding any changes. The board of directors reviews the guidelines annually. For additional information pertaining to our investment portfolio, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments.”

      We utilize an independent investment manager to invest our assets in accordance with our investment guidelines. Conning Asset Management Inc. (“Conning”), a subsidiary of Swiss Reinsurance Company, has been our investment manager since June 1998. The Investment Committee of the board of directors periodically reviews the performance of, and the fees paid to, Conning. We are not aware of any affiliation by us with Conning other than through our pool retrocession agreement with Swiss Re Life & Health America, Inc. The fees paid to Conning for services rendered during 2004 totaled $73,045.

Underwriting and Policy Administration

      As an automatic reinsurer, we rely upon the underwriting of the ceding life companies on policies we reinsure. We review and monitor the underwriting standards and procedures of the ceding life companies, including rules for policy continuations, changes, re-entries, reinstatements and conversions.

      The ceding life companies administer policies we reinsure and provide us with all information necessary for processing the reinsurance. We have conducted only a limited review of the administrative practices of our ceding life companies. Therefore, we may not have sufficient information to properly evaluate the administration of the business we reinsure or the accuracy of the information provided by the ceding life companies.

      Our reinsurance agreements give us the right to periodically audit the books and records of the ceding life companies to ensure that all business is being properly ceded and administered. Management also communicates frequently with the ceding life companies regarding the administration of the business, business policies and practices, underwriting procedures, quality of business considerations and reinsured policy experience.

Retention

      Our profitability depends, in part, on the volume and amount of death claims incurred. While death claims are reasonably predictable over a period of many years, claims become less predictable over shorter periods and are subject to fluctuation from period to period. Actual mortality experience in a particular period may be greater than expected mortality experience and, consequently, may adversely affect our operating results for such period.

      As partial protection against the unpredictability of claims experience, we have entered into a pool retrocession agreement covering certain life insurance policies we reinsure. Under the pool retrocession agreement, multiple reinsurers participate in the risks ceded by us. Standard mortality risks in excess of our life insurance retention limit of $100,000 per life are retroceded to pool participants, which include: Scottish Re Life Corporation, Swiss Re Life & Health America, Inc., The Lincoln National Life Insurance Company, and Transamerica Occidental Life Insurance Company.

      If equity markets decline sufficiently, we may incur a claim expense on certain annuity policies in excess of our life insurance retention limit of $100,000 per life. Currently, five annuity policies, or 0.01%, of our annuity policies in force exceed our life insurance retention limit by an aggregate exposure of approximately $81,000 with an average excess exposure of approximately $16,000 per life. Increases in the equity market may result in fewer annuity policies exceeding our life insurance retention limit while decreases in the equity market may result in more annuity policies exceeding our life insurance retention limit.

Regulation of Global Preferred Re

      The Insurance Act 1978 and related regulations of Bermuda (the “Insurance Act”), which regulates the insurance business of Global Preferred Re, provides that no person shall carry on any insurance business in or from within Bermuda unless registered as an insurer under the Insurance Act by the Bermuda Monetary Authority (the “Authority”). Under the Insurance Act, insurance business includes reinsurance business.

      The Insurance Act imposes solvency and liquidity standards and auditing and reporting requirements and grants to the Authority powers to:

      The Authority may appoint an inspector with extensive powers to investigate the affairs of an insurer if the Authority believes that an investigation is required in the interest of the insurer’s policyholders or persons who may become policyholders. Further, Global Preferred Re, as a long-term insurer registered under the Insurance Act, may only be wound-up or liquidated by order of the applicable Bermuda court.

      Independent Approved Auditor. Every registered insurer must appoint an independent auditor who will annually audit and report on the statutory financial statements and the statutory financial return of the insurer, both of which, in the case of Global Preferred Re, are required to be filed annually with the Authority. The independent auditor of the insurer must be approved by the Authority and may be the same person or firm that audits the insurer’s financial statements and reports for presentation to its shareholders. Global Preferred Re’s independent auditor is Arthur Morris Christensen & Company.

      Statutory Financial Statements. An insurer must prepare annual statutory financial statements. The Insurance Act prescribes rules for the preparation and substance of such statutory financial statements, which include, in statutory form, a balance sheet, an income statement, a statement of capital and surplus and notes thereto. The insurer is required to give detailed information and analyses regarding premiums, claims, reinsurance, and investments. Global Preferred Re, as a long-term insurer, is required to submit to the Authority the annual statutory financial statements as part of its annual statutory financial return.

      Minimum Solvency Margin; Restrictions on Dividends. The Insurance Act also regulates the payment of dividends and the minimum solvency margin. For additional information, refer to Note 9 to the Consolidated Financial Statements.

      Principal Representative. An insurer is required to maintain a principal office in Bermuda and to appoint and maintain a principal representative in Bermuda. For the purpose of the Insurance Act, Global Preferred Re’s principal representative is International Advisory Services, Ltd. (“IAS”) and its principal office is located at 44 Church Street, 3rd Floor, Hamilton HM 12, Bermuda. Without a reason acceptable to the Authority, Global Preferred Re may not terminate the appointment of its principal representative, and the principal representative may not cease to act as such, unless 30 days’ notice in writing to the Authority is given of the intention to do so. It is the duty of IAS, as Global Preferred Re’s principal representative, within 30 days of reaching the view that there is a likelihood of it becoming insolvent or that a reportable event has, to the principal representative’s knowledge, occurred or is believed to have occurred, to make a report in writing to the Authority setting out all the particulars of the case that are available to the principal representative.

      In general, reinsurers domiciled outside the United States (referred to as “alien reinsurers”) are not subject to substantial direct regulation in the United States. The insurance laws of each state of the United States generally do not regulate the sale of reinsurance within their jurisdictions by non-U.S. insurers. However, alien reinsurers, such as Global Preferred Re, that provide reinsurance to insurance companies domiciled or licensed in United States jurisdictions are indirectly regulated by state “credit for reinsurance” laws. These laws operate to deny statutory financial statement credit to ceding insurers unless the unauthorized alien reinsurer posts acceptable security for ceded liabilities and agrees to certain contract provisions.

      The state insurance laws in the United States restricting the investments of insurance companies are not applicable to Global Preferred Re. Unlike insurance regulations in the United States, Bermuda law does not limit or regulate investments of Global Preferred Re as a long-term insurer provided that such investments are made for its potential benefit and the minimum solvency ratios prescribed under the Insurance Act are not breached.

Competition

      Reinsurance and insurance companies compete based on many factors, including:

      While we compete with numerous national and international reinsurance companies, primary insurance companies, underwriting syndicates and other financial services providers, many of which are well established, have significant operating histories and substantially greater underwriting, marketing and administrative resources than we do, we believe that our focus on building relationships with IMOs can be a distinguishing feature.

      Distinguishing us from other companies in our industry, subject to the restrictions of the Reorganization Agreement, our growth strategy includes the expansion of our relationships with IMOs

through the formation of reinsurance structures specific to their business or through the use of financial incentives, which may include stock, warrants and other forms of equity in our company. We believe our core strengths and expertise may result in:

      Our ability to compete with other potential reinsurers in this market will depend upon our ability to successfully develop and maintain strong relationships with IMOs. In addition to our continuing focus on our current independent agent relationships, we commenced implementing marketing programs in late 2002 to develop new IMO relationships.

      Direct insurance companies who are licensed to underwrite insurance are also licensed to underwrite reinsurance, making commercial access into the reinsurance business relatively uncomplicated. In addition, over the last several years, capital markets participants, including exchanges and financial intermediaries, have developed financial products intended to compete with traditional reinsurance. We are unable to predict the extent to which new, proposed or potential initiatives may affect the demand for our products. Barriers to entry to the reinsurance industry for non-insurers are chiefly the time, capital, and talent necessary to attract, underwrite, and manage the business.

      We cannot assure you that we will be able to compete successfully, and the inability to do so could have a material adverse effect upon our ability to implement our strategies.

Employees

      As of December 31, 2004, we had eight full-time employees. None of our employees are covered by a collective bargaining agreement. We consider our relations with our employees to be good.

      We believe our future success will depend in large part on our ability to recruit and retain qualified employees experienced in insurance and underwriting. The competition for such personnel is intense, and there can be no assurance that we will be successful in retaining or recruiting key personnel.

      In October 2002, we entered into a lease agreement for office space in Duluth, Georgia. The initial lease term, as amended, is thirty-six months, with the option to extend the term an additional thirty-nine months, expiring in January 2009. Payments under this lease are $125,842 annually through October 2005. The lease payments are subject to an annual increase of approximately 3%. We do not own or lease any other properties.

      We are not a party to any material legal proceedings.

      During the fourth quarter of 2004, no matters were submitted to our security holders for a vote.

PART II

      No public trading market existed for our common stock during 2004 and we did not repurchase any of our common stock in 2004.

      At March 15, 2005, we had 4,141,684 shares of common stock outstanding and approximately 860 stockholders.

      We have not declared or paid any cash dividends on our common stock during 2003 or 2004 and our board of directors does not anticipate declaring or paying any cash dividends in the foreseeable future. Further, while the Reorganization Agreement is in effect, Global Preferred and Global Preferred Re must obtain prior written consent from AEGON and GAC to make or pay any dividend with respect to its shares, other than dividends payable from Global Preferred Re to Global Preferred which may not exceed, on average, $6,384 per day measured from December 30, 2004. We anticipate that all of our earnings and other cash resources, if any, will be distributed in the dissolution of Global Preferred pursuant to the Reorganization Agreement, subject to stockholder approval and the consummation of the sale of Global Preferred Re. Otherwise, if the transactions contemplated by the Reorganization Agreement are not consummated, we expect that we will retain all of our earnings and other cash resources, if any, for the purpose of financing Global Preferred Re’s reinsurance business and other strategic opportunities that may develop. Our future dividend policy will be subject to the discretion of our board of directors, and will be contingent upon our results of operations, financial position and capital requirements, general business conditions, restrictions imposed by financing arrangements, if any, legal and regulatory restrictions on the payment of dividends and other factors that our board of directors deems relevant.

      As a holding company with no direct operations, the payment of dividends by us in the future will be largely dependent on our receipt of dividends from Global Preferred Re. For a discussion of restrictions on the payment of dividends by Global Preferred Re, refer to Note 9 to the Consolidated Financial Statements.

      The following table sets forth selected financial data and other operating information. The selected financial data have been derived from our consolidated financial statements and should be read in conjunction with our consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

      The following analysis of our consolidated financial condition and results of operations should be read in conjunction with “Selected Financial Data” and the consolidated financial statements and accompanying notes included elsewhere in this report.

     Overview

      Global Preferred provides reinsurance solutions for the life insurance and annuity industry. However, while the Reorganization Agreement is in effect, Global Preferred Holdings, Inc. and Global Preferred Re must obtain prior written consent from AEGON and GAC to enter into new reinsurance agreements. Our principal business objective is to align the long-term interests between independent marketing organizations and life insurance companies. Through these collaborative relationships, we believe both the IMOs and insurers benefit from mutually rewarding relationships based on aligned interests, a dedication to improving the quality of business written, and a focus on managing insurance and distribution risk for long-term economic rewards.

      Although our reinsurance business is directed to us through these independent agent relationships, the life insurance and annuity policies that we currently reinsure are underwritten and issued by various ceding life companies. In the insurance industry, the term “ceding” refers to the use of reinsurance to transfer from one insurance company to another some or all of the risks associated with one or more insurance policies. We often refer to a life insurance company that reinsures life insurance and annuity policies through us as a “ceding life company.” The strength of our current reinsurance business is based on our historical relationship with the independent agents of World Financial Group.

      Under a reinsurance agreement, the economic consequences of certain insurance risks are transferred from the ceding life company to the reinsurer. Depending upon the type of reinsurance agreement, these risks may include mortality, persistency, investment and expense. Key considerations in evaluating the risks include:

      The ceding life companies retain responsibility for the payment of all claims, surrender values, commissions, and expenses involved in issuing and maintaining the policies we reinsure. In addition, the ceding life companies administer the reinsurance contracts and, on a monthly and quarterly basis, provide us with information regarding premiums, reserves and benefits and the amounts we owe to the ceding life company for claims and settlement expenses on the policies we reinsure.

     Types of Reinsurance

      We currently write three types of reinsurance on a quota share basis: renewable term, coinsurance and modified coinsurance.

      Renewable Term. Renewable term, also referred to as risk premium reinsurance, which includes monthly renewable term and yearly renewable term, is a plan of reinsurance in which the premium rates are not directly related to the premium rates on the original plan of insurance. Under renewable term reinsurance, the ceding life company reinsures a portion of the mortality risk with us. The amount reinsured in any one period is not based on the face amount of the policy, but rather on the portion of the

net amount of risk we reinsure. The net amount of risk is typically defined as the difference between the death benefit and the cash value of a policy. The ceding life company establishes the policy reserves, which are reduced for the mortality risk reinsured with us, and pays all policy benefits, commissions and expenses involved in issuing and maintaining the business. Correspondingly, we establish reserves specific to the mortality risk reinsured.

      Under renewable term reinsurance, we may also be subject to the effects of persistency risk. Persistency risk is the risk that a policyholder either stops paying premiums, which would cause the policy to lapse, or chooses to surrender the policy for the cash surrender value. The effect of persistency risk on us is that possible future revenue will be reduced, potentially reducing profits.

      Coinsurance. Under a coinsurance arrangement, the insured risks are ceded to us on essentially the same basis as underwritten by the ceding life company. The ceded risks include mortality, persistency, investment and expense. We share the risks pro rata with the ceding life company. We receive a proportionate share of gross premiums from the ceding life company and provide contractual expense allowances to the ceding life company to pay for the expenses associated with the reinsured policies. Expenses include commissions and costs associated with underwriting, marketing, policy issue and maintenance. We also pay our proportionate share of death benefits and other policy benefits to the ceding life company. The reserves on the ceded portion of the policy are held by us and are our obligations. Correspondingly, we invest the assets related to the reserves and receive investment income from those assets.

      Modified Coinsurance. Modified coinsurance is similar to coinsurance except the ceding life company does not transfer the reserves or the invested assets related to the reserves. Modified coinsurance is used primarily for products that develop cash values and allows the ceding life company to retain the associated assets for investment purposes.

Critical Accounting Policies and Estimates

      The preparation of financial statements in conformity with accounting principals generally accepted in the United States requires management to make estimates and assumptions regarding uncertainties that affect certain amounts in the consolidated financial statements and related footnotes. Accounts that we deem to be sensitive to changes in estimates include deferred acquisition costs and future policy benefits. In all instances, actual results could differ from estimates. A summary of significant accounting policies is included in Note 2 to the Consolidated Financial Statements.

      Reinsurance Revenues. For renewable term reinsurance, we record as “premiums” the amount of reinsurance premiums we receive over the payment periods of the reinsured policies. For policies reinsured on a coinsurance or modified coinsurance basis, we record as “reinsured policy revenues” our proportionate share of the gross revenues received by the ceding life company over the payment periods of the reinsured policies. These revenues represent the policy mortality and expense charges, asset-based allowances and deferred sales charges that have been assessed against the reinsured policy account balances.

      Reinsurance Expenses. Regardless of the type of reinsurance, our related expenses may include: (1) benefits, claims and settlement expenses, which represent our share of the payments made under the reinsured policies during the period, the change in claims in course of settlement and the change in claims incurred but not reported; (2) expense allowances paid to the ceding life company for expenses associated with the reinsured policies, including commissions and costs associated with underwriting, marketing, policy issue and maintenance; and (3) amortization of deferred acquisition costs, which are discussed in more detail below.

      Net Income. Our profitability, in part, depends on the volume of policies reinsured and experience of the reinsured policies. Factors that affect the experience of the business include reinsured policy persistency, death claims and investment performance of the separate account balances. While death

claims are reasonably predictable over a period of years, claims become less predictable over shorter periods, and are subject to fluctuation from quarter to quarter and year to year. Similarly, separate account investment returns, upon which a significant portion of our revenues depend, may have relatively stable returns over a period of years but can be volatile over shorter periods. A considerable amount of separate account balances is invested in equities; therefore, prolonged deterioration in the equity markets will result in a decrease in our current and future income.

      Deferred Acquisition Costs. We capitalize and defer costs that vary with and are primarily related to the acquisition of the reinsured policies. These expenses are deferred to the extent that such costs are deemed recoverable from future policy revenues and are recorded as deferred acquisition costs on the balance sheet. Such costs include reinsurance expense allowances paid to ceding life companies, and may include other underwriting costs such as actuarial, legal and accounting fees.

      Deferred acquisition costs are amortized over the lives of the underlying policies, in conformity with the terms of the reinsurance agreement. Under the renewable term agreements, deferred acquisition costs are amortized in proportion to the premium revenue related to the mortality risk reinsured. Such premium revenue is estimated using the same assumptions used for computing liabilities for future policy benefits. Such assumptions include estimates of expected investment yields, mortality, persistency and expenses applicable at the time the policies are reinsured. Original assumptions on renewable term business continue to be used in subsequent accounting periods to determine changes in the deferred acquisition costs unless a premium deficiency exists. Under the renewable term agreements, the amortization is in proportion to the ratio of premiums collected during the then current period to total anticipated premiums and is adjusted to reflect actual persistency of the insurance in force.

      Under the coinsurance and modified coinsurance agreements, the amortization of the deferred acquisition costs is in proportion to the ratio of gross profits recognized during the then current period to total actual and future expected gross profits. During each accounting period, assumptions used in calculating the amortization of the deferred acquisition costs reflect actual experience for the then current accounting period. We also review, on a periodic basis, our evolving experience concerning our assumptions with regard to mortality, persistency, investment yields and expenses in determining our estimate of anticipated future gross profits. This periodic review is commonly referred to as “unlocking.” Our normal period of observation is from October 1 of the previous calendar year through September 30 of the current calendar year. If we believe variances from expected assumptions are permanent, we will change the assumptions we use with regard to future experience. Upon adoption of any change in assumptions used with regard to future experience, amortization of the deferred acquisition costs will be recalculated and reflected during the then current accounting period.

      A material component of variable life and annuity product revenues is derived from the asset-based fees that have been assessed against the policy account balances, of which a considerable portion is invested in the equity markets. The volatility of equity market returns over the short-term can be significant without materially impacting long-term equity market returns. Historical equity market performance shows equity market volatility is much higher over short term horizons as compared to long-term horizons. The short-term volatility of the policy account balance would result in a proportional adjustment to all future expected gross profits if no other adjustments were made to account for the differences between long-term and short-term volatility. To account for the differences between long-term and short-term volatility, we utilize a “credibility approach.” Under this approach, the estimates of future expected gross profits are adjusted to recognize the effects short-term volatility and market yields have upon long-term yield expectations. We review our approach annually to determine if additional adjustments to amortization are necessary as a result of prolonged and/or severe negative or positive equity market performance. In such instances, the equity market performance must be sufficiently high or low to justify a belief that the effect of current market conditions on future expected gross profits should be more permanently reflected.

      In addition, certain variable annuity policies we reinsure include a death benefit typically equal to the greater of (i) a return of premium or (ii) the highest level the policy account balance had accumulated over certain prescribed periods under the annuity policy. Upon the death of an annuity policyholder, we will incur a claim expense equal to the excess, if any, of the amount guaranteed under this provision over the then current policy fund value. The claim expense, as a percentage of the death benefit, tends to increase when equity markets decline and decrease when equity markets increase. The claim expense depends, in part, on the number and amount of death claims incurred. To account for the expense associated with these guaranteed minimum death benefits, we utilize an explicit method consistent with Statement of Position (“SOP”) 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts. Under this method, we may establish a guaranteed minimum death benefit (“GMDB”) liability if expected future claims expenses are not proportionate to future expected policy charges. Future expected gross profits are reduced to account for future expected claims expenses and adjusted for anticipated changes in the GMDB liability. The short-term volatility of the policy account balance will result in significant volatility in the expected claims expense and in the GMDB liability balance if no recognition is made to acknowledge differences between long-term yields and short-term volatility. Using a credibility approach, our explicit method recognizes the effect of long-term versus short-term volatility when accounting for guaranteed minimum death benefits. The implementation of SOP 03-1 did not have a material impact on our financial condition and results of operations in 2004 because the methodology to account for minimum guaranteed death benefits prescribed in SOP 03-1 resulted in liability and deferred acquisition cost balances that were materially consistent with the liability and deferred acquisition cost balances that resulted from the methodology we historically employed.

      Future Policy Benefits. Liabilities for future benefits on life insurance policies are established in an amount we estimate is adequate to meet the estimated future obligations on the policies in effect. Policy reserves are included in “future policy benefits” on the consolidated balance sheet.

      Liabilities for future policy benefits under the renewable term agreements include provisions for expected future claims. The liability is estimated using assumptions such as estimates of expected investment yields, mortality, persistency and expenses applicable at the time the reinsurance contracts are executed.

      Liabilities for future policy benefits under coinsurance and modified coinsurance agreements equal reinsured policy account balances on the underlying life insurance and annuity policies. With regard to the separate account benefits reinsured on a modified coinsurance basis, we record the liabilities as an offset to related assets as our intentions and rights under the agreements with the ceding life companies meet the appropriate conditions governing rights of setoff. The nature of separate account benefits under variable life insurance or variable annuity policies do not permit us to reinsure those benefits on a coinsurance basis. We currently reinsure the fixed account portion of life insurance and annuity policies only on a coinsurance basis and, accordingly, the liabilities for that portion of the reinsurance are recorded as future policy benefits.

      Liabilities for future policy benefits under our reinsurance agreements may include provisions for claims that have been incurred but have not yet been paid. A portion of these claims represent claims reported to us that are in the course of settlement. The remainder of this liability represents claims that may have been incurred but not yet reported to us.

      Liabilities for future policy benefits reflected in the consolidated financial statements are based on information provided to us by the ceding life companies. Reserves established by us with respect to individual risks or classes of business may not be the same as those established by ceding life companies due to differing risks and assumptions regarding mortality, persistency, investment, and expenses.

Fair Value Disclosure

      Investments. We classify all fixed maturity securities and equity securities, that are not classified as trading securities, as “available for sale.” Such securities are reported at fair value. Fixed maturity

securities available for sale are so classified based upon the possibility that such securities could be sold prior to maturity if that action enables us to execute our investment philosophy and appropriately match investment results to operating and liquidity needs. Equity securities available for sale are so classified because we do not intend to actively trade such securities. Unrealized gains and losses on marketable equity securities and fixed maturity securities available for sale, less applicable deferred income taxes, are reported as a separate component of “accumulated other comprehensive income” within stockholders’ equity. Investment income is recognized as it accrues or becomes legally due. Other equity investments, classified as trading securities are bought and held principally for the purpose of selling them in the near term and are reported at fair value. Unrealized gains and losses on trading securities are reported as a separate revenue component on the income statement.

      Realized gains or losses on sales of investments are included in income, as are write-downs of securities where declines in value are deemed to be other-than-temporary. In determining whether a decline in market value on our fixed income securities is other-than-temporary, we consider the cause of the impairment, the length of impairment, the amount of impairment as a percentage of the fair value of the security and other relevant information about the issuer or security. Although we utilize an independent investment manager to invest and manage our assets in accordance with our investment guidelines, we have the ability and intent to hold these securities until a forecasted recovery of fair value is at least equal to the amortized cost or until maturity. The cost of investment securities sold is determined based upon the specific identification method.

      Other Financial Assets and Liabilities. The carrying value of cash and cash equivalents, reinsurance receivables and payables, short-term debt, accrued expenses and accounts payable approximate their fair values due to the short-term nature of these accounts. The carrying value of future policy benefits approximates its fair value as credited interest approximates current market rates.

Our Current Reinsurance Agreements

      The life insurance and annuity policies that we have reinsured to date are underwritten and issued by Western Reserve, American Skandia, Kemper and Pacific Life. The following table indicates the percentage of our reinsurance revenues derived from our ceding life companies:

      The following table indicates, by ceding life company: (1) the names and types of insurance products we currently reinsure; (2) the type of reinsurance agreement applicable to each; (3) policy issue dates reinsured under each agreement; and (4) the commencement date of the reinsurance.

      Under our reinsurance agreements with the ceding life companies, we currently reinsure variable life insurance and variable annuity policies on either a renewable term basis or a coinsurance and modified coinsurance basis. The policies we reinsure on a renewable term basis represented 58% of our reinsurance revenues for the year ended December 31, 2004. The policies we reinsure on a coinsurance and modified coinsurance basis represented 42% of our reinsurance revenues for the same period. Of the 42%, 24% relates to variable life insurance policies and 18% relates to variable annuity policies.

      Following World Financial Group’s purchase of certain assets of WMA Agency in June 2001, we entered into certain agreements with Western Reserve that provide us a first right to reinsure certain new products issued by Western Reserve or its U.S. affiliates that are sold by agents associated with World Financial Group. Concurrently, Global Preferred entered into a directed reinsurance agreement with World Financial Group in July 2001 to help us secure the opportunity to reinsure all insurance products sold by its agents for insurance companies with which it has selling agreements other than Western Reserve and Western Reserve’s affiliates. Refer to Note 5 to the Consolidated Financial Statements for further discussion.

Results of Operations

      The following table sets forth certain operating data as a percentage of total revenue for the periods indicated:

      Premiums. Premiums decreased $292,000, or 2%, from $17.4 million for the year ended December 31, 2003 to $17.1 million for the same period in 2004. The majority of the premium decrease was due to the decreasing business in force under our renewable term agreements, which is partially offset by an increase in the average premium per policy. Policies in force are decreasing because the number of policy surrenders and lapses currently exceeds the number of new policies reinsured. Average premiums per policy increase as policyholders age.

      Reinsured Policy Revenues. Reinsured policy revenues decreased $264,000, or 2%, from $12.8 million for the year ended December 31, 2003 to $12.5 million for the same period in 2004. This decrease was primarily attributable to the effect of policy surrender activity for our variable annuity business, which is partially offset by an increase in mortality and expense charges and asset-based fees resulting from an increase in average reinsured policy account balances in 2004.

      Additionally, for the year ended December 31, 2004, reinsured policy revenues reflect an increase of $130,000 of reinsurance fees resulting from payments to us from Western Reserve to resolve certain settlement differences in the administration of our variable universal life coinsurance and modified

coinsurance reinsurance agreements. These settlement adjustments also resulted in a decrease in benefits, claims and settlement expenses, a decrease in reinsurance expense allowances, net and an increase in amortization of deferred acquisition costs of $63,000, $73,000 and $178,000, respectively, for a total increase in income before income tax of $88,000.

      Net Investment Income. Net investment income increased $442,000, or 109%, from $407,000 for the year ended December 31, 2003 to $849,000 for the same period in 2004, primarily due to the increased average size of our fixed maturity and equity securities portfolio during 2004 as compared to the average size of our fixed maturity and equity securities portfolio in 2003. The increase in our fixed maturity and equity securities portfolio resulted from the purchase of $16.8 million of fixed maturity and equity securities during 2003, most of which occurred in the latter half of the year, and $6.8 million of fixed maturity securities purchased during 2004. The purchases and sales activities by quarter are shown in the table below:

Investment Purchases and Sales

      Net Realized Gains & Loss on Investments. The sale of $3.0 million of fixed maturity and equity securities available for sale for the year ended December 31, 2004 resulted in a net realized loss on investments of $27,000 and was primarily due to an increase in market yields since the securities were purchased. The sale of $421,000 of fixed maturity and equity securities available for sale for the year ended December 31, 2003 resulted in a net realized gain on investments of $21,000 and was primarily due to a decline in market yields since the securities were purchased.

      Net Unrealized Gain on Investments. For the year ended December 31, 2004, we had $549,000 of other equity investments classified as trading securities, which resulted in an unrealized gain on investments of $49,000. There were no other equity investments classified as trading securities for the year ended December 31, 2003, thus no unrealized gains or losses were recognized in income during such period.

      Benefits, Claims and Settlement Expenses. Benefits, claims, and settlement expenses decreased $2.4 million, or 26%, from $9.3 million for the year ended December 31, 2003 to $6.9 million for the same period in 2004. The decrease was primarily associated with a lower incidence of death claims in 2004 compared to the incidence of death claims in 2003. The decline in benefits, claims, and settlement expenses was primarily due to lower claims in 2004 than historic averages as compared to higher than historic average claims experienced in 2003 and the declining aggregate face value of insurance, which was partially offset by the increasing age of the policies reinsured. The aggregate face value of insurance underlying the policies we reinsured at December 31, 2003 was $7.6 billion compared to $7.0 billion at December 31, 2004.

      Change in Future Policy Benefits. Change in future policy benefits decreased $409,000, or 38%, from $1.1 million for the year ended December 31, 2003 to $645,000 for the same period in 2004. The decrease resulted from the aging of the policies and the decrease in business in force reinsured on a renewable term basis.

      Reinsurance Expense Allowances, Net. Net reinsurance expense allowances decreased $450,000, or 6%, from $8.1 million for the year ended December 31, 2003 to $7.7 million for the same period in 2004. This decrease was primarily attributable to a decrease in business in force, partially offset by an increase in reinsurance expense allowances associated with an increase in policy account balances. Policy account balances increased primarily because of positive separate account fund yields and premiums and deposits, which were partially offset by policy surrender activity.

      Amortization of Deferred Acquisition Costs. Amortization of deferred acquisition costs increased $672,000 or 12%, from $5.5 million for the year ended December 31, 2003 to $6.2 million for the same period in 2004. The increase in amortization primarily resulted from higher gross profits in 2004 primarily due to lower death claims, and increases in rates of amortization since policy account balances remain below our long-term expectations.

      Under current assumptions, and all else being equal, we do not expect that there would be increased amortization in 2005 from “unlocking” due to lower than expected equity market performance unless market performance caused separate account fund balances to decline by 35% or more in 2005.

      Operating Expenses. Operating expenses decreased $60,000, or 2%, from $3.4 million for the year ended December 31, 2003 to $3.3 million for the same period in 2004. These expenses include salaries and benefits, professional fees for legal, actuarial and accounting fees and other operating expenses. The decline resulted from an overall decrease in operating expenses resulting from increased operating efficiency, partially offset by increased consulting and legal fees relating to the Reorganization Agreement.

      Interest Expense. Interest expense decreased $158,000, or 42%, from $375,000, for the year ended December 31, 2003 to $217,000 for the comparable period in 2004. The decrease was due to the repayment on July 29, 2004 of the $5 million promissory note, plus outstanding interest, due to Money Services, Inc., a subsidiary of AEGON USA, Inc.

      Income Taxes. Due to higher levels of income before income taxes, income taxes increased $572,000, or 57%, from $1.0 million for the year ended December 31, 2003 to $1.6 million for the same period in 2004. The “small life insurance company deduction” available under Section 806 of the Internal Revenue Code for qualifying life insurance companies can reduce the effective federal income tax rate from 34% to less than 20% depending upon the amount of current taxable income. Based upon our taxable income in 2004, we have estimated our effective tax rate to be 28% for 2004, as compared to 34% in 2003. The tax rate in 2004 reflects a $315,000 benefit from the small life insurance company deduction. In 2003, our taxable income was not sufficient to take advantage of the small life insurance company deduction.

      In accordance with Statements of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes, we have $1.3 million of net operating loss carry-forwards, which begin to expire in 2018. These net operating loss carry-forwards at a 34% effective tax rate are included as an offset to the deferred tax liability. If the transactions contemplated by the Reorganization Agreement are not consummated, it is our belief that it is more likely than not that the deferred tax assets will be realized by us as an offset against future taxable income, however, if we do not have sufficient taxable income in the future to utilize this asset, a write-off may result, thereby reducing our net income, otherwise, these assets will be transferred in the sale of Global Preferred Re.

      Premiums. Premiums decreased $584,000, or 3%, from $18.0 million for the year ended December 31, 2002 to $17.4 million for the same period in 2003. The majority of the premium decrease

was due to the decreased business in force under our renewable term agreements, which was partially offset by an increase in the average premium per policy. Policies in force decreased because the number of policy surrenders and lapses exceeded the number of new policies reinsured. Average premiums per policy increase as the insured grows older.

      Reinsured Policy Revenues. Reinsured policy revenues decreased $1.1 million, or 8%, from $13.9 million for the year ended December 31, 2002 to $12.8 million for the same period in 2003. This decrease was primarily attributable to a decline in mortality and expense charges and asset-based allowances resulting from a decline in average account balances in 2003 as compared to the same periods in 2002 and the effect of policy surrender activity for our variable annuity business.

      Net Investment Income and Net Realized Gain on Investments. Net investment income decreased $335,000, or 45%, from $742,000 for the year ended December 31, 2002 to $407,000 for the same period in 2003, primarily due to the decreased size of our fixed maturity securities portfolio during 2003 as compared to 2002. The decrease in our fixed maturity securities portfolio resulted from the sale of $9.9 million of fixed maturity securities in 2002, with $8.5 million of such amount being sold in December 2002. The proceeds of these sales were predominantly held in cash and cash equivalents during 2003. Net realized gain on investments decreased $406,000, from $428,000 for the year ended December 31, 2002 to $21,000 for the same period in 2003. The decrease was due to the sale of $9.9 million of fixed maturity securities in 2002 as compared to sales of only $421,000 of securities in 2003. Net realized gains are caused by a decline in market yields, which resulted in an increase in the fair value of the fixed maturity securities in our portfolio.

      Benefits, Claims and Settlement Expenses. Benefits, claims and settlement expenses increased $840,000, or 10%, from $8.4 million for the year ended December 31, 2002 to $9.3 million for the same period in 2003. The increase was primarily associated with a lower incidence of life insurance death claims in 2002 compared to the incidence of death claims in 2003, an increase in the average death claim size and the increasing age of the policies reinsured, partially offset by a decline in the aggregate face value of insurance. The aggregate face value of insurance underlying the policies we reinsured at December 31, 2002 was $8.5 billion compared to $7.6 billion at December 31, 2003.

      Change in Future Policy Benefits. Change in future policy benefits decreased $471,000, or 31%, from $1.5 million for the year ended December 31, 2002 to $1.1 million for the same period in 2003. The decrease resulted from the aging of the policies and the decrease in business in force reinsured on a monthly renewable term basis.

      Reinsurance Expense Allowances, Net. Net reinsurance expense allowances decreased $382,000, or 4%, from $8.5 million for the year ended December 31, 2002 to $8.1 million for the same period in 2003. These amounts reflect the decrease in business in force due to policy lapse and surrender activity. The decrease was also due to lower average account balances in 2003 as compared to the same periods in 2002 because of equity market performance.

      Amortization of Deferred Acquisition Costs. Amortization of deferred acquisition costs decreased $1.5 million, or 21%, from $7.0 million for the year ended December 31, 2002 to $5.5 million for the same period in 2003. The decrease in amortization primarily resulted from additional amortization in 2002 due to the then higher than expected surrender experience, including “unlocking” our near term surrender assumptions to reflect the increase in our surrender experience (akin to the then industry-wide surrender experience).

      Operating Expenses. Operating expenses increased $267,000, or 9%, from $3.1 million for the year ended December 31, 2002 to $3.4 million for the same period in 2003. These expenses included salaries and benefits, professional fees for legal, actuarial and accounting services and other operating expenses. The majority of the increase was attributable to an increase of $572,000 resulting from directors’ and officers’ insurance premiums, office operating expenses, professional fees, marketing expenses, taxes and

licenses, and shareholder communications. These increases were partially offset by a $301,000 decrease in salaries, bonuses and recruiting expenses due to the reductions in staffing and employee bonuses.

      Costs of Withdrawn Offering. During October 2002, we withdrew the registration statement for our proposed initial public offering of 9.5 million shares of common stock. Offering costs related to our withdrawn offering were $1.7 million for the year ended December 31, 2002. These costs, which consisted primarily of legal, printing, accounting and actuarial fees, were expensed during the quarter ended September 30, 2002. We did not incur any similar expenses in 2003.

      Interest Expense. Interest expense decreased $5,000, or 1%, from $380,000, for the year ended December 31, 2002 to $375,000 for the comparable period in 2003. The decrease was due to the interest associated with the $7.2 million settlement paid to Western Reserve on April 2, 2002 to fund the reinsurance amendments that were effective January 1, 2002.

      Income Taxes. Due to higher levels of income before income taxes, income taxes increased $209,000, or 26%, from $789,000 for the year ended December 31, 2002 to $998,000 for the same period in 2003. Income before income taxes is comprised of income subject to taxes that is recognized and due in the current period and income subject to tax that is recognized during the current period but is due in future periods. The “small life insurance company deduction” available under Section 806 of the Internal Revenue Code for qualifying life insurance companies can reduce the effective federal income tax rate from 34% to less than 20% depending upon the amount of current taxable income. For the years ended December 31, 2002 and 2003, we had no current taxable income and, as a result, we were unable to take advantage of any of the small life insurance company deduction. For 2003, however, we were subject to alternative minimum tax. Our effective tax rate was 34% in both 2002 and 2003.

      In accordance with SFAS No. 109, Accounting for Income Taxes, we have $2.4 million of net operating loss carry-forwards, which begin to expire in 2018. These net operating loss carry-forwards at a 34% effective tax rate are included as an offset to the deferred tax liability. It is our belief that it is more likely than not that the deferred tax assets will be realized as an offset against future taxable income, however, if we do not have sufficient taxable income in the future to utilize this asset, a write-off may result thereby reducing our net income.

Quarterly Results of Operations

      The following table presents certain unaudited quarterly consolidated statements of income data for the eight-quarter period ended December 31, 2004, as well as the percentage of total revenue represented by each item. The information has been derived from the unaudited consolidated financial statements. The unaudited consolidated financial statements have been prepared on substantially the same basis as the audited consolidated financial statements contained herein and all adjustments, consisting only of normal recurring adjustments, which we consider to be necessary to present fairly this information when read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein. The results of operations for any quarter are not necessarily indicative of the results to be expected for any future period.

      The following table sets forth, as a percentage of total revenue, certain line items in the consolidated statements of income for the periods indicated:

      Historically, our operations and related revenues and operating results have varied substantially from quarter to quarter, and we expect variations to continue. Our quarterly operating results will continue to vary significantly depending on a number of factors, including fluctuations in demand for reinsurance products and variable life insurance and annuity products, as well as the sales price and resulting gross margin for specific reinsurance contracts. A high percentage of our operating expenses, particularly personnel, marketing and rent are relatively fixed in advance of any particular quarter.

Investments

      As of December 31, 2004, we had invested assets totaling $34.6 million with a pre-tax unrealized gain of $235,000. The table below shows the aggregate amounts of fixed maturity securities, equity securities, cash and cash equivalents, and reinsured policy loans comprising our portfolio of invested assets:

      As of December 31, 2004, the fixed maturity portion of our invested asset portfolio had a dollar weighted average Moody’s rating of Aa2, an average duration of 2.9 years and an average yield to maturity of 4.1% before investment expenses.

      The following table summarizes the fair value of our invested assets at the dates indicated.

      The following table summarizes the fair value by contractual maturities of our fixed maturity securities portfolio at the dates indicated.

      The following table summarizes the composition of the fair value of our fixed maturity securities portfolio at the dates indicated by rating as assigned by S&P or Moody’s, using the higher of these ratings for any security where there is a split rating.

Segment Reporting

      We have defined our reportable segments based on the nature of our reinsurance agreements and the accounting treatment used for the various reinsurance agreements. For definitions of these segments and associated financial information, refer to Note 13 of the Consolidated Financial Statements.

Liquidity and Capital Resources

      To grow our life and annuity business, we use cash to pay for the initial marketing and underwriting expenses of the policies we reinsure. These same policies thereafter provide cash from premiums, policy charges and policy fees over their lifetime. We also use cash to pay for policy claims, policy benefits and operating expenses which include: salaries and benefits, and professional fees for management, legal, investment, custodial, accounting, tax and consulting services. In addition to operating cash flows, cash is provided by and used in investing and financing activities we undertake to increase our capital position and through activities associated with our invested assets.

      Our primary sources of liquidity were $20.1 million in fixed maturity securities available for sale, $12.5 million in consolidated cash and cash equivalents and $0.5 million of equity securities at December 31, 2004. The effective duration of our fixed maturity portfolio is 2.9 years with 100% of the fixed maturity securities having an effective maturity of less than 10 years. Our fixed maturity portfolio represents 60% of our total invested assets, and has an average Moody’s quality rating of Aa2. We have gross unrealized losses of $61,000 and gross unrealized gains of $248,000 on our fixed maturity securities available for sale as of December 31, 2004. We have determined that none of our fixed maturity securities are other-than-temporarily impaired. For additional information pertaining to our investments, refer to Note 3 to the Consolidated Financial Statements.

      Our capital structure consists only of equity. On July 29, 2004, Global Preferred repaid $5 million plus outstanding interest of $187,500 on a five-year convertible term note due to Money Services, Inc., a subsidiary of AEGON USA, Inc. The principal and interest were paid out of available cash and cash equivalents. Interest was payable on the note at 7.5% per annum, on the 29th of each succeeding January and July through and including July 29, 2004. As of December 31, 2003, we had an outstanding principal balance on the term note of $5 million and accrued interest of $158,000.

      Operating Cash Flows. Under the renewable term reinsurance agreements, premiums typically vary in proportion with the expected mortality claims reinsured. Our cash inflows under the renewable term agreements are premiums for the mortality risk reinsured. Our cash outflows are reinsurance expense allowances and death benefit claims. The reinsurance expense allowances represent our share of acquisition

and maintenance expenses incurred by the ceding life company that are attributable to the risks reinsured by us.

      Under the coinsurance and modified coinsurance agreements, since we are reinsuring risks on essentially the same basis as that of the original policy, reinsurance premiums are materially greater than premiums received on the renewable term reinsurance. During the first year in which a policy is reinsured on a coinsurance basis, we are required to reimburse the ceding life company for our share of acquisition costs, including first year commissions and issuance expenses. Thereafter, we reimburse the ceding life company for our share of renewal commissions and maintenance expenses. Further, under modified coinsurance, the ceding life company does not transfer the reserves or the invested assets related to reserves in support of reinsured policy benefits (e.g., cash values). Accordingly, because of the type of reinsurance and the basis reinsured, the net first year cash outlays could be as much as, or more than, that year’s premiums paid for variable universal life insurance, and as much as 10% of variable annuity premiums. After the first policy year, our cash outlays for reinsurance allowances are significantly lower.

      Net cash flows provided by (used in) operating activities were ($341,000), $10.8 million and $9.1 million for the years ended December 31, 2002, 2003 and 2004, respectively. Cash flows provided by operations in 2004 relating to new policies reinsured under coinsurance and modified coinsurance reflected net payments of $69,000 to Western Reserve to reinsure policies issued in 2004, and cash flows provided by operations for policies previously in force under coinsurance and modified coinsurance and by all policies reinsured under renewable term reinsurance of $14.2 million. Other cash flows used in operating activities of $5.0 million in 2004 were the result of cash payments for operating expenses, income taxes and interest expenses.

      Cash flows provided by operations in 2003 relating to new policies reinsured under coinsurance and modified coinsurance reflected net payments of $156,000 to Western Reserve to reinsure policies issued in 2003, and cash flows provided by operations for policies previously in force under coinsurance and modified coinsurance and by all policies reinsured under renewable term reinsurance of $12.0 million. Other cash flows used in operating activities of $1.0 million in 2003 were the result of cash payments for operating expenses and interest expenses.

      Cash flows used in operating activities in 2002 relating to new policies reinsured under coinsurance and modified coinsurance were $10.2 million and were primarily the result of the $7.2 million settlement paid to Western Reserve in April 2002 to increase the amount of business we reinsure as a result of the reinsurance amendments, settlements paid to reinsure policies issued in 2002 as a result of those amendments, and settlements paid to American Skandia to reinsure policies issued in 2002. These were offset by $14.8 million of cash flows provided by policies reinsured under coinsurance and modified coinsurance prior to 2002 and by all policies reinsured under renewable term reinsurance. Other cash flows used in operating activities of $4.9 million in 2002 were the result of cash payments for operating expenses, income taxes and interest expenses.

      The following table summarizes the components of operating cash flows.

      Investment Cash Flows. We generally receive premiums in advance of paying related benefits and claims. In addition, some policies we reinsure require that we credit interest on funds that are deposited with us. We invest these assets in securities that will provide a return and cash flow stream that are consistent with these benefits. Investment cash flows are the result of buying, selling and holding these securities in addition to activities relating to buying and selling fixed assets.

      Net cash flows provided by (used in) investing activities were $9.3 million, ($15.0 million) and ($3.2 million) for the years ended December 31, 2002, 2003 and 2004, respectively. The cash flows used in investing activities of $3.2 million in 2004 primarily related to our purchase of $6.8 million of fixed maturity securities, which was partially offset by the sale of $1.0 million of fixed maturity securities and $2.0 million of equity securities and the maturities and principal payments of $700,000 on fixed maturity securities. The cash flows used in investing activities of $15.0 million in 2003 primarily related to our purchase of $14.3 million of fixed maturity securities and $2.5 million of equity securities. The cash flows provided by investing activities of $9.3 million in 2002 were the primarily the result of $10.5 million of proceeds generated from the sale and maturity of available for sale securities. We incurred no significant capital expenditures during 2004.

      Financing Cash Flows. Financing cash flows relate primarily to activities associated with our capital position. Net cash flows used in financing activities were $1.1 million, zero and $5.0 million for the years ended December 31, 2002, 2003 and 2004, respectively. Cash flows used in financing activities in 2004 related to the principal payment due to Money Services for the five-year term note. There were no cash flows provided by or used in financing operations in 2003. Cash flows used in financing activities in 2002 related to the withdrawal of the registration statement in October 2002 for our proposed initial public offering of 9.5 million shares of common stock. The registration statement was withdrawn due to unfavorable market conditions. Cash flows used in financing activities resulted in $1.7 million of deferred offering costs expenses in 2002, offset by $577,000 of cash paid for deferred offering costs in 2001, which had been previously recorded as prepaid expenses on the consolidated balance sheet.

      Restrictions. Global Preferred Holdings, Inc. is a holding company with no direct operations, and whose principal assets are the capital stock of Global Preferred Re and $5.9 million of cash and invested assets, as of December 31, 2004. Global Preferred relies primarily on funds retained at the holding company level, management service fees from its subsidiaries and potential dividends from Global Preferred Re to meet ongoing cash requirements. The ability of Global Preferred Re to pay dividends to Global Preferred is subject to, among other things, regulatory restrictions under the insurance laws of Bermuda, which are discussed in Note 9 to the Consolidated Financial Statements. In addition, the Reorganization Agreement specifies that while the agreement is effective Global Preferred Re may not pay Global Preferred cumulative dividends in excess of $6,384 per day and cumulative management fees in excess of $8,000 per day. As of December 31, 2004, Global Preferred Re had estimated total statutory capital and surplus of approximately $28.0 million, which includes up to an estimated $12.7 million available for distribution as dividends without seeking regulatory approval. Global Preferred Re is not required to file its statutory statement for the year ended December 31, 2004 until April 30, 2005. During the year ended December 31, 2004, Global Preferred Re paid no dividends to Global Preferred.

      Under our reinsurance agreements, we are required to provide security through a letter of credit for the benefit of the ceding life companies. We have three letters of credit issued by Comerica Bank, our custodian, for the benefit of Western Reserve, Pacific Life and Kemper, in the amounts of $5.5 million, $50,000 and $300,000, respectively. We assess our letter of credit needs in support of each reinsurance agreement. If determined to be necessary, we will undertake to develop facilities for future letters of credit and trust arrangements in support of additional reinsurance agreements.

      If the transactions contemplated by the Reorganization Agreement are consummated, we will receive approximately $57 million of marketable AEGON common shares in exchange for all of the outstanding shares of Global Preferred Re. As a result, our operations and substantially all operating cash flows, except for investment income and run-off expenses, will cease. The Reorganization Agreement provides that we must dissolve and distribute all remaining AEGON common shares received pursuant to the Reorganization Agreement and any of our other remaining assets to our stockholders, after making adequate provision for our liabilities in accordance with Delaware law, no more than twelve months after closing of the asset transfer.

Contractual Obligations and Commitments

      The following table shows our contractual obligations and commitments including our payments due by period. Refer to Note 10 to the Consolidated Financial Statements for further details.

Currency

      At December 31, 2004, we had written all of our reinsurance business in U.S. dollars. If, in the future, we write business in currencies other than the U.S. dollar, we intend to invest a portion of the premiums collected on the reinsurance contract in securities denominated in the same foreign currency as the premium received. We also intend to consider and evaluate our foreign currency exchange risk and hedge our exposure.

Inflation

      The effects of inflation have not had a material impact on our operations or the conduct of our business. Inflationary trends are typically countered by a tightening monetary policy by the U.S. Federal Reserve, resulting in increases in interest rates. Rapid and severe interest rate increases could have a significant and negative impact on the value of our fixed income portfolio.

Off Balance Sheet Arrangements

      We have no obligations, assets or liabilities other than those disclosed in our financial statements, no trading activities involving non-exchange traded contracts accounted for at fair value, and no relationships and transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.

Recent Accounting Pronouncements

      For a discussion of certain recently issued accounting pronouncements, refer to Note 2 to the Consolidated Financial Statements.

Forward-Looking Statements

      Certain statements made in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the “safe-harbor” provisions of that Act. Additionally, any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. These statements may include, but are not limited to statements relating to reinsurance revenues, gross profits, cash flows, and net income in future periods. Such statements often include the words “believes,” “expects,” “assumes,” “predicts,” “continue,” “potential,” “should,” “could,” “can,” “may,” “will,” “proposes,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” and variations or negations of such expressions or similar expressions. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. Because such forward-looking statements involve risks, both known and unknown, and uncertainties, there are important factors

that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including but not limited to:

      These forward-looking statements are subject to change and uncertainty that are beyond our control and have been made based upon our expectations and beliefs concerning future developments and their potential effect on our business. We cannot assure you that future developments will be in accordance with our expectations or that the effect of future developments will be those we anticipate. Actual results could differ materially from those we expect, depending upon the outcome of certain factors, including those described in the forward-looking statements. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. We have described some important factors that could cause our actual results to differ materially from our expectations in “Factors That May Affect Future Results of Operations” included as Exhibit 99.1. You should carefully review these risks and additional risks described in other documents we file from time to time with the Securities and Exchange Commission, including quarterly reports on the Form 10-Q. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

      We seek to earn a favorable risk-adjusted total return on our assets by engaging in an investment strategy that employs strategies to manage investment risk. We attempt to maintain adequate liquidity in our fixed income portfolio to fund operations and protect against unexpected events. We have diversified our portfolio to reduce volatility. We seek to manage our credit risk through industry and issuer diversification, and interest rate risk by monitoring the duration and structure of our investment portfolio relative to the duration and structure of our liability portfolio. We are exposed to potential loss from various market risks, primarily changes in interest rates and equity prices. Accordingly, earnings would be affected by these changes. We manage our market risk based on investment policies approved by our board of directors.

      We do not directly manage the allocation of our assets to strategies or underlying funds, nor do we control the manner in which they are invested by underlying fund managers. We utilize an independent investment manager to invest our assets in accordance with our investment guidelines. Conning Asset Management Inc., a subsidiary of Swiss Reinsurance Company, has been our investment manager since June 1998. Conning has discretionary authority to manage our non-cash investment portfolio. As a result,

the performance of our aggregate investment portfolio depends largely on the ability of Conning to select and manage appropriate investments. However, we consistently and systematically monitor the strategies and funds in which we are invested, and we believe our overall risk is limited as a result of our selected strategy.

      Our cash and fixed income investment portfolio includes investments that are subject to changes in market values with changes in interest rates. The impact on our cash and fixed income investment portfolio from an immediate 100 basis point increase in market interest rates would have resulted in an estimated decrease in fair value of 2.1%, or approximately $660,000, on a portfolio valued at approximately $32.5 million at December 31, 2004. The impact on our cash and fixed income investment portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in fair value of 1.7%, or approximately $559,000. The foregoing reflects the use of an immediate time horizon. Credit spreads are assumed to remain constant in these hypothetical examples.

      The following financial statements are attached hereto commencing on page F-1.

      On June 19, 2003, we dismissed KPMG LLP as our independent registered public accounting firm. The decision to dismiss KPMG LLP was made by the Audit Committee of the Board of Directors in consultation with management after soliciting proposals from KPMG LLP and other auditors. The audit report of KPMG LLP on our consolidated financial statements as of and for the year ended December 31, 2002, did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

      In connection with the audits of our fiscal year ended December 31, 2002 and the subsequent interim period through June 19, 2003, there were no disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to KPMG LLP’s satisfaction, would have caused KPMG LLP to refer to the subject matter of the disagreements in connection with their report.

      On June 19, 2003, the Audit Committee engaged Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2003. During the two previous fiscal years and through the date of their engagement, neither we nor anyone engaged on our behalf consulted with Deloitte & Touche LLP on items regarding either: (1) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Registrant’s financial statements; or (2) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) with our former auditor or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

      On November 12, 2004, Deloitte & Touche LLP resigned as our independent registered public accounting firm, effective following completion of its services related to the review of our interim financial statements for the quarter and nine months ended September 30, 2004. The resignation was the sole decision of Deloitte & Touche LLP. The audit report of Deloitte on our consolidated financial statements

as of and for the year ended December 31, 2003, did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.

      In connection with the audit of our fiscal year ended December 31, 2003 and the subsequent interim period through November 12, 2004, there were no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to refer to the subject matter of the disagreements in connection with their report.

      On November 30, 2004, the Audit Committee engaged Marcum & Kliegman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2004. During the two most recent fiscal years and through the date of engagement, neither we nor anyone engaged on our behalf has consulted with Marcum & Kliegman LLP on items regarding either (1) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Registrant’s financial statements; or (2) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) with our former auditor or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

      As of the most recent fiscal quarter end, we carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined by Rule 13a-14(c) of the Securities Exchange Act of 1934) under the supervision and with the participation of our chief executive officer and chief financial officer. Based on and as of the date of such evaluation, the aforementioned officers have concluded that our disclosure controls and procedures were effective, in all material aspects, to ensure that information required to be disclosed in the reports we file with the Securities and Exchange Commission is recorded, processed, summarized and reported as and when required.

      There were no significant changes in our internal controls or other factors that could significantly affect these controls subsequent to the date our chief executive officer and chief financial officer carried out their evaluation. There were not significant deficiencies or material weaknesses identified in the evaluation and, therefore, no corrective actions were taken.

      None.

PART III

      The directors and executive officers and their ages as of the date of this report are as follows:

      The following is additional information concerning each of our executive officers and directors.

      Edward F. McKernan has served as a director since August 1997. Mr. McKernan has served as our Chief Executive Officer since January 2002, and as President since December 2000. Mr. McKernan was elected as President of our subsidiary, Global Preferred Re, in December 2000, as a director in April 2002, and as Chief Executive Officer and Chairman in February 2004. Mr. McKernan served as the Actuary for Global Preferred Re from April 1996 until October 2002. From December 1997 until March 2002, Mr. McKernan served as Chief Financial Officer of Global Preferred. From August 1995 until December 2000, Mr. McKernan served as Senior Vice President of Global Preferred and Global Preferred Re. From April 1996 until June 2001, Mr. McKernan was also Senior Vice President and Actuary of World Marketing Alliance, Inc. Prior to joining Global Preferred, he was a Senior Manager in the Life Actuarial Consulting Practice of KPMG LLP from 1993 through 1996. From August 1990 through September 1993, Mr. McKernan was the Marketing Actuary of U.S. Operations for Seaboard Life Insurance Company. Prior to his tenure with Seaboard Life, Mr. McKernan was employed as a consultant associated with Tillinghast, a Towers Perrin company, an international actuarial consulting firm. He is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. He serves on the investment, capital finance and nomination committees of the board of directors.

      Bradley E. Barks has served as Interim Chief Accounting Officer since February 2005 and as Chief Financial Officer and Senior Vice President of Finance since March 2002, and as Senior Vice President of Finance of Global Preferred Re since September 2002, and Actuary of Global Preferred Re since October 2002. Mr. Barks also served as Chief Financial Officer of Global Preferred Re from September 2002 until February 2004. Prior to joining Global Preferred, Mr. Barks was self-employed as an independent financial and management consultant. From 1990 to 2000, Mr. Barks served as Senior Vice President — Finance of LifeUSA Holding, Inc. and its successor company Allianz Life Insurance Company of North America.

Prior to his tenure with LifeUSA, Mr. Barks was employed as a Senior Consultant for Touche Ross & Co. from 1981 to 1990. Mr. Barks is a certified public accountant, a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries.

      Caryl P. Shepherd has served as Chief Accounting Officer since February 2002, as Secretary since December 2001, as Vice President since December 2000, as Vice President and Treasurer of Global Preferred Re since December 2000, and as Chief Financial Officer of Global Preferred Re since February 2004. Ms. Shepherd joined Global Preferred in November 1997 as Controller and was named Treasurer in December 1997, positions she continues to hold. Ms. Shepherd held the position of Assistant Secretary from December 2000 until her election as Secretary. From April 1995 through October 1997, Ms. Shepherd was a Senior Accountant with Western Reserve. Prior to her tenure with Western Reserve, Ms. Shepherd was a Senior Auditor for the public accounting firm of Ernst & Young LLP specializing in life insurance. Ms. Shepherd is a certified public accountant, a Fellow of the Life Management Institute and a member of the American Institute of Certified Public Accountants.

      Joseph F. Barone has served as a director since June 1998, and as Chairman since January 2002. Mr. Barone is a consultant to Firemark Investments, a private investment firm. From July 1997 to October 2003, Mr. Barone was Managing Director of Research for Firemark Investments. From January 1992 through June 1997, he was a Senior Vice President with Swiss Re Insurance. Prior to his tenure with Swiss Re, Mr. Barone was a Managing Director of Investment Banking for the insurance industry at Bear, Stearns & Co., Inc. Mr. Barone is a Chartered Financial Analyst and a member of the New York Society of Security Analysts and the Association of Insurance and Financial Analysts. He serves on the audit, investment, compensation and capital finance committees of the board of directors.

      Thomas W. Montgomery has served as a director since March 1995 and as a director of Global Preferred Re since August 1995. From March 1995 until December 2001, Mr. Montgomery served as Executive Vice President and Secretary. Mr. Montgomery served as Executive Vice President of Global Preferred Re from August 1995 until December 2001. Mr. Montgomery is President of World Marketing Alliance, Inc. and Executive Vice President of World Leadership Group, Inc. Mr. Montgomery serves as a director of World Money Group, Inc., a financial services holding company. Mr. Montgomery is a certified public accountant, member of the American Institute of Certified Public Accountants and a member of the Georgia Society of Certified Public Accountants. He serves on the investment, capital finance and nomination committees of the board of directors.

      Milan M. Radonich has served as a director since July 2001. Since May 2002, Mr. Radonich has been Chief Financial Officer of Benfield Inc., a subsidiary of Benfield Group Limited, a leading independently-owned global provider of reinsurance and risk advisory services. From October 2001 to April 2002, Mr. Radonich was self-employed as an independent consultant. From September 2000 to September 2001, he was Chief Financial Officer of Allied North America Insurance Brokerage Corp. of New York, a multi-line insurance brokerage firm. Prior to his affiliation with Allied, Mr. Radonich was with Ernst & Young LLP for 27 years in the insurance industry practice. Mr. Radonich is a certified public accountant, a Fellow of the Life Management Institute and serves as Co-Chairman of the Society of Insurance Financial Management’s Reinsurance Committee and served as former Co-Chairman of its Accounting Committee. He also holds memberships in the American Institute of Certified Public Accountants, the FLMI Society of Greater New York, the New York Area IASA, the Illinois and New York State Certified Public Accountant Societies, and the International Who’s Who of Professionals. He serves on the audit, compensation, investment, capital finance and nomination committees of the board of directors.

      C. Simon Scupham has served as a director since April 1996, as a director of Global Preferred Re since August 1995. Mr. Scupham is a director and Chairman of Shoreline Mutual Management Ltd., which is owned by IAS Global Captive Group, Ltd., which is also a holding company for International Advisory Services, Ltd. (“IAS”). IAS provides professional management services to international companies operating in Bermuda, including Global Preferred. From 2001 until 2004, Mr. Scupham also served as a director of IAS Global Captive Group, Ltd., which is the holding company for IAS. Mr. Scupham founded an insurance management company in 1991, which was subsequently acquired by

and merged into IAS. Prior to joining IAS, Mr. Scupham served as the General Manager of Bermuda operations of the Kemper Group. He is a qualified Chartered Accountant and Associate Fellow of the Institute of Mathematics and its Applications. He serves on the audit and compensation committees of the board of directors.

Audit Committee and Audit Committee Financial Experts

      Our board of directors has established a separately designated standing audit committee for the purpose of overseeing our accounting and financial reporting processes and the audits of our financial statements. Messrs. Barone, Radonich and Scupham are the members of the committee. The board believes that the members of the audit committee, taken as a whole, based on their experiences and backgrounds, are qualified to effectively carry out the duties and responsibilities of the audit committee. The board has further determined that Mr. Radonich qualifies as the “audit committee financial expert” in accordance with the rules of the Securities and Exchange Commission.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act 1934 requires our directors and executive officers and persons who own beneficially more than 10% of the common stock to file reports of ownership and changes in ownership of such stock with the Securities and Exchange Commission. To our knowledge, based solely on review of copies of such reports furnished to us, during the year ended December 31, 2004, each of the following persons failed to file a Form 4, Statement of Changes in Beneficial Ownership, on a timely basis: Joseph F. Barone; Monte Holm; Thomas W. Montgomery; Milan M. Radonich and C. Simon Scupham.

Code of Ethics

      Our board of directors has adopted a code of ethics entitled “Policy on Business Ethics” that is applicable to all members of our board of directors, our executive officers and our employees. We have posted the policy in the Investor Relations section of our website, at www.gphre.com. If, in the future, we amend, modify or waive a provision in the Policy on Business Ethics, we may, rather than filing a Form 8-K, satisfy the disclosure requirement under Item 10 of Form 8-K by posting such information on our website as necessary.

      The following table sets forth, for the years ended December 31, 2004, 2003 and 2002, the total compensation paid by the Company to our chief executive officer, and our next three most highly compensated executive officers whose salary and bonus for 2004 exceeded $100,000 (collectively, the “Named Executive Officers”).

Summary Compensation Table